This story could save you $100,000!

The price of doing nothing about re-financing a mortgage can add up to over $100,000 over the life of a typical loan.

With mortgage rates starting to move higher from some providers, there is now a wide discrepancy in the rates on offer in what is still a highly competitive market.

People with mortgages of up around 5 percent could save themselves significant amounts if they were pro-active and took action to shop around for a better rate.

Take this example from one of the mortgage calculators from one of the big banks.

They have a special offer of a 4.1 percent mortgage, over 30 years.

Assume the amount borrowed is $500,000, and the monthly repayments are $1705. Over the life of the loan, total repayments come in at $901,479, and of this $401,479 is interest.

The very same bank has a standard variable rate of 5.22 percent, also over 30 years.

On the same $500,000 mortgage, monthly repayments are $2175. Over the life of this loan, total repayments are $1,026,719, of which $526,719 is interest.

By taking the cheaper loan, the saving is $470 per month. Over the life of the loan, the difference in total repayments is a whopping $125,240, which is a significant price to pay for being lazy and doing nothing.

When shopping for a new loan, however, it is also buyer beware when engaging the services of a mortgage broker.

Research from finance industry regulator ASIC released this week show that while the financial advice industry is moving away from the commission to fee for service, commissions are still commonplace in mortgage broking.

Shadow shopping by consumer group CHOICE found that only two of 15 brokers approached disclosed the fact that they were paid commissions.

These are substantial amounts. On the average $500,000 loan in 2015 the upfront commission was $3100, while brokers were also paid the ongoing “trail commissions” of around $75 a month.

Instead of ensuring clients get the best deal, some brokers are steering borrowers towards products which deliver a commission to them.

The research claimed they are also incentivised to sell interest only loans, because that makes it possible for people to borrow more and get into more debt.

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